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Is Viavi Solutions Inc (VIAV) Going to Burn These Hedge Funds?

How do we determine whether Viavi Solutions Inc (NASDAQ:VIAV) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Is Viavi Solutions Inc (NASDAQ:VIAV) undervalued? The best stock pickers are taking a bearish view. The number of long hedge fund positions went down by 7 recently. Our calculations also showed that viav isn’t among the 30 most popular stocks among hedge funds. VIAV was in 22 hedge funds’ portfolios at the end of September. There were 29 hedge funds in our database with VIAV positions at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Clint Carlson, Carlson Capital

We’re going to check out the latest hedge fund action regarding Viavi Solutions Inc (NASDAQ:VIAV).

What have hedge funds been doing with Viavi Solutions Inc (NASDAQ:VIAV)?

Heading into the fourth quarter of 2018, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VIAV over the last 13 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with VIAV Positions

The largest stake in Viavi Solutions Inc (NASDAQ:VIAV) was held by Dorsal Capital Management, which reported holding $54.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $47.7 million position. Other investors bullish on the company included Carlson Capital, Renaissance Technologies, and Ratan Capital Group.

Seeing as Viavi Solutions Inc (NASDAQ:VIAV) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there were a few hedge funds who sold off their entire stakes last quarter. Intriguingly, Leon Shaulov’s Maplelane Capital cut the largest stake of the 700 funds followed by Insider Monkey, totaling close to $16.4 million in stock. James Dinan’s fund, York Capital Management, also said goodbye to its stock, about $7 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 7 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Viavi Solutions Inc (NASDAQ:VIAV) but similarly valued. These stocks are Newmark Group, Inc. (NASDAQ:NMRK), Albany International Corp. (NYSE:AIN), Realogy Holdings Corp (NYSE:RLGY), and WNS (Holdings) Limited (NYSE:WNS). All of these stocks’ market caps match VIAV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NMRK 17 69578 7
AIN 13 91570 6
RLGY 23 722694 4
WNS 14 178577 -3
Average 16.75 265605 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. That figure was $224 million in VIAV’s case. Realogy Holdings Corp (NYSE:RLGY) is the most popular stock in this table. On the other hand Albany International Corp. (NYSE:AIN) is the least popular one with only 13 bullish hedge fund positions. Viavi Solutions Inc (NASDAQ:VIAV) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RLGY might be a better candidate to consider a long position.

Disclosure: None. This article was originally published at Insider Monkey.

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